Nova reports strong results, bullish guidance

The company says the boom in chip manufacturing is generating strong demand for its products.

Nova Measuring Instruments Ltd. (Nasdaq:NVMI; TASE:NVMI) has reported strong results for the fourth quarter of 2016. The company's sales hit a peak of $50.2 million, up 14.2%, compared with the preceding quarter, and 25%, compared with the corresponding quarter in 2015. This figure matches the company's previous guidance published in late January, and is slightly higher than the analysts' forecasts.

Nova reported an $8.4 million GAAP net profit, $0.30 per share, 58% higher than in the fourth quarter of 2015, and above the analysts' forecasts of $0.23-0.29 per share. Non-GAAP profit (excluding one-time expenses) totaled $11.7 million, $0.42 per share, up 24%, compared with the preceding quarter, and a 121% upward leap, compared with the corresponding quarter in 2015.The analysts' consensus forecast was $0.39 per share.

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Nova manufactures several types of machines. Its products include metrology (statistical measurement) systems for monitoring semiconductor manufacturing processes. Semiconductors are the basic units in integrated circuits, such as chips, memory, etc. The Nova share price responded to the report with a 3% rise, completing a 70% surge over the past year and pushing the company's market cap up to NIS 1.6 billion.

Nova's 2016 revenue rose 10% to $164 million. Its GAAP net profit, including a $12.9 million item related to its royalties agreement with the Chief Scientist , totaled $9.6 million, $0.35 per share, compared with $15.7 million, $0.57 per share, in 2015. Nova's 2016 non-GAAP net profit reached $30 million, $1.10 per share, which is 43% higher than in 2015. Nova had $92 million in cash as of the end of 2015.

As for 2017, Nova's management, led by president and CEO Eitan Oppenhaim, is projecting $50-54 million in revenue in the first quarter, with GAAP net profit reaching $0.31-0.39 per share and non-GAAP net profit being in the $0.37-0.45 per share range. The analysts' consensus for the first quarter is $48.5 million in revenue and a $0.32 net profit per share.

Upon the publication of Nova's results, CFO Dror David said, "The company presented a strategic plan in 2013 for doubling its sales to $200 million. The fourth quarter results, combined with the forecasts for the first quarter of 2017, reflect a sales rate of over $100 million for two quarters, and we therefore believe that we are making excellent progress towards realizing this strategic plan. Global consumption of chips is slated to grow 7% in 2017, and equipment investments are expected to grow by over 5%. This is happening because of a number of simultaneous trends: the need for advanced chips for high-end devices, such as iPhone 8 and Samsung 8, launching of which is expected in 2017, and the rising IoT trend for devices like watches, other wearable equipment, vehicles, etc.

"These two trends require investment in the production of advanced chips, as well as simpler chips made by chip producers, mainly in China, whose output is growing exponentially. At the same time, large companies like Samsung and Intel are already announced increased investments in chip and memory-making equipment in 2017. In view of the overall trend, we are getting support from all types of manufacturers. All the areas of demand in which Nova works are looking strong and growing."

Oppenhaim adds, "The company's business soundness, as reflected in the strong forecasts for the first quarter, will also continue throughout 2017, while we continue to safeguard our rights in a number of customers in various market segments. We expect to continue benefiting from our effective business model in the coming years, a model that will lead us to continued growth in profit."